Confusing Fee Agreements Violate Ethics Rules

On cross appeals from Respondent and the State Bar, the Arizona Supreme Court granted both reversal of the violations found but misconduct in allegations rejected below and ordered a suspension of six months and a day

The record does not support the Panel’s determination that Eckley violated Arizona Rules of Professional Conduct (“ERs”) 8.1 and 8.4(c), which were the only violations found by the Panel. The Court agrees with the Bar, however, that Eckley violated ERs 1.4(b) and 1.7(a)(2). Because Eckley violated these ethical rules knowingly, and in light of his extensive history of discipline arising from similar ethical violations, we find that a six-month-and-one-day suspension is appropriate. We do not find that restitution is warranted.

The allegation involved clients in two separate matters

Riley had been in business with her ex-husband and had entered into a stock redemption agreement that she believed  failed to adequately compensate her. She retained Eckley to obtain a business valuation and file suit to recover additional compensation for her share of the business. Eckley worked on the matter but directed another lawyer associated with his firm to take primary responsibility for the case. Although Riley engaged Eckley in September 2017, and he billed her substantial amounts over the next nine months, Eckley did not file suit on her behalf until May 2018. He withdrew from the representation in November 2018. The Bar alleged that Eckley engaged in misconduct by using client engagement documents that violated ethical rules; failing to advance Riley’s objectives or follow her directives; overcharging Riley for his services; failing to adequately supervise another attorney and others; charging Riley’s credit card after she had withdrawn authorization; needlessly expanding proceedings; and refusing to participate meaningfully in fee arbitration.

Bradley, through her son, Mark Monje, retained Eckley in February 2021 to assist with a real estate matter. They parted ways within months due to billing disputes. The Bar alleged that Eckley engaged in misconduct by charging Bradley’s credit card for fees after Monje had withdrawn authorization and by implementing an onerous dispute resolution process after Monje raising concerns about the Firm’s billings.

Rejected charges

we are not convinced that Eckley was dishonest by asserting that [Bar Counsel Steven] Little had approved his fee agreement with Riley. He did not hide the differences between the fee agreement Little had approved (the Harrison Agreement) and the fee agreements he used with Riley and Monje/Bradley. Instead, he argued that although some terminology had been changed and rearranged, the material portions remained the same.

But the Bar prevailed on other allegations

We agree with the Bar that the Riley engagement documents violated both ERs 1.4 and 1.7(a)(2) in several ways. First, the fee provisions, which are scattered throughout the documents, are vague, sometimes contradictory and are flat-out confusing. At bottom, neither Riley nor any other client entering into these engagement documents would know precisely what attorney fees are being charged, preventing the client from making an informed decision about undertaking and continuing the representation. See ER 1.4. And because the fee provisions are open-ended, they would permit Eckley to charge higher hourly rates without restraint, pitting his personal interests against Riley’s interests. See ER 1.7(a)(2).

Eckley’s attorney fees are addressed in several different places. The New Case Notes provide that attorney fees are $250 per hour “for litigation work depending on complexity” and then $375 per hour “for prep and appearance at hearings, deposition, trials and all other legal proceedings.” This is confusing because “litigation work” would generally include “prep and appearance” at the abovedescribed events. No terms are defined, which might have provided guidance. Thus, from reading the New Case Notes alone, the client cannot know precisely what the attorney is charging.

Open ended

The Employment Agreement sets different rates and, unlike the New Case Notes and the Initial Employment Information document, these rates are not fixed. Specifically, the Employment Agreement sets “base hourly rate[s]” at amounts “not less than” $250 for “nonlitigation work” and “not less than” $350 for “litigation-oriented work.” (This also conflicts with the New Case Note’s and Initial Employment Information document’s $375 per hour rates for, respectively, “prep and appearance” and “litigation”.). Like the prior documents, the Employment Agreement does not define what constitutes “non-litigation work” and “litigation-oriented work.” Also, not only are these rates different from the rates in the New Case Notes and the Initial Employment Information document, by stating they are minimum rates, the Employment Agreement leaves the fee calculation uncertain.

In addition to the billing issues, only the attorney could invoke arbitration

contrary to public policy, Eckley had the sole authority to elect arbitration.

Extensive prior dicipline impacted the sanction

But for Eckley’s extensive prior disciplinary record involving problematic fee agreements, this would not appear to be a case that warrants a lengthy suspension, lacking any findings that Riley was injured or confused by the fee agreements. Here, however, Eckley has been disciplined multiple times. Some of these prior disciplinary proceedings involved using fee agreements that included the same terms disapproved of here. Bar counsel had worked with Eckley to bring his agreements into compliance, only to find these efforts thwarted when Eckley reverted to using agreements with blatantly impermissible terms. Where we have been confronted with a lawyer’s refusal to acknowledge the wrongful nature of his conduct notwithstanding a prior discipline for the same conduct, and when suspension is called for, we believe it appropriate that the offending attorney be required to demonstrate his rehabilitation in an application for reinstatement…

We therefore affirm the sanction of a six-month-and-one-day suspension.

(Mike Frisch)